LEED Exploded in Popularity, Major Cities Dropped the Green Hammer on Private Developers, and CBRE is Going Carbon Neutral. Which One was Most Influential?
It was a good year to be Equity Office Properties
, a better year to be Blackstone
. It was not a good year to be Countrywide Home Loans. Grubb & Ellis
and Hilton Hotels
are all under new ownership. But long after the conversations of cheap debt, credit crunches and private equity are played out, 2007 is likely to be remembered by just one word: green.
"It's now on the lips of little-bitty babies coming from their mothers' womb," comedian Whoopi Goldberg told TIME in nominating the word "green" for its Person of the Year. "It's being used by people who never thought about it before in their lives."
The rise of green, a fringe issue until 2007, is now being felt across the industry. Developers like Hines
are going green from the ground up, while trade groups like BOMA
are preaching it to the top firms on down. Architects are designing it, property managers are applying it, brokerages are advocating it.
And tenants and investors are buying into it, thanks to new eco-friendly corporate agendas, bloated energy costs, local lawmakers and looming federal regulation. Corporations are demonstrating they're willing to pay a premium to work in sustainable office space, while the federal government -- by far the nation's largest tenant and property owner -- has mandated sustainability across much of its real estate portfolio. The volume of green real estate is expected to quintuple by 2010 to comprise 10 percent of the U.S. building stock, according to a conservative study by McGraw Hill Construction.
"Green building is fundamentally altering real estate market dynamics ... The upshot will be a redefinition of what constitutes Class A properties and even institutional-quality real estate," said a November study on sustainable real estate investing by RREEF, one of the nation's largest property investors. "Property owners will need to adapt quickly -- or risk the consequences of sharply shrinking demand for property that, over time, becomes increasingly obsolete."
CoStar News explored the year that was in green real estate and found a few favorites. Here are our Top 10 picks for 2007's most influential green events.
#1 | A Sustainable CB Richard Ellis
It wasn't the first, but the world's largest CRE services firm is making a serious bid to be the best. The soon-to-be carbon neutral company is now promoting energy efficiency programs across its 1.7 billion square feet of managed real estate, and has partnered with BOMA
and the U.S. Green Building Council
(USGBC) on other important sustainability programs. Size matters -- and with 24,000 employees and more than 60,000 global lease and sale transactions completed last year, its sustainability agenda is positioned to drive the industry.
#2 | LEED Takes Center Stage
Not too long ago, LEED certification wasn't a forethought, an afterthought or any other thought among property owners and tenants. Not anymore. The sustainable design rating system is now the clear-cut favorite among U.S. rating systems, and nearly synonymous with the industry's definition of green building. As of mid-2007, close to 100 million square feet of LEED-certified space had been constructed, half of which was certified in the past 17 months, and participation in higher levels of certification continues to increase. Critics say the system is too pricey and confusing, but supporters love its flexible requirements. More than 8,000 commercial projects are currently seeking certification, more than double the number last year.
#3 | Green Mandates in Boston and Washington
No green means no green light for big commercial developments and rehabs in Boston and Washington, D.C., according to groundbreaking legislation passed in the two East Coast hubs last year. As the first major U.S. cities to extend regulation to the private sector, they created a model and a trend for other large towns to follow. Los Angeles, San Francisco and Baltimore have proposed similar mandates.
#4 | Rise of the Green Investor
The niche green investment market lags other real estate sectors due to limited building stock and a wait-and-see approach by investors, but it's catching on just in time. Pension fund giants CalPERS
along with GE Real Estate (see below) have made significant green commitments, lending credibility to an attractive ROI on green investments. Hines, Koll and Prudential, Thomas Properties and Revival are approaching green from the development side, while funds from Jonathan Rose Cos., Forward Funds and TIC exec Wayne Hannah are also receiving press.
#5 | UN Calls Out Commercial Real Estate
Its less-than-rosy 78-page assessment on the building industry relative to climate change was hardly dinner table fodder, but the UN's March report was timely and justified. It focused on the industry as both a major contributor to global warming and a key to mitigating climate change, with up to 40 percent of global primary energy being used in buildings. While the report wasn't widely discussed in U.S. real estate circles, it did signal a more focused interest on the part of global policy makers. CB Richard Ellis issued a similar report
#6 | GE Real Estate Brings Green Things to Life
The global property investor with 385 million square feet in assets committed this fall to green its investment practices from top-to-bottom. "With thousands of buildings in our portfolio ... we believe we can make a significant, positive impact on the environment and benefit our business," new GE Real Estate head Ron Pressman said of the decision. Its effects will ring loudly in Chicago and on the West Coast, where GE took pieces of the EOP/Blackstone offering and continues to rapidly expand in California through new subsidiary Arden Realty
#7 | WTC to be Green Beacon
With the world watching, New York City's World Trade Center complex is coming back bigger and greener than anyone imagined. The six-building site, which includes the nation's tallest building and JPMorgan's
new Investment Banking headquarters, will total more than 14 million square feet when combined with Goldman Sachs'
new world headquarters nearby and retail space
at the planned transit hub. Every building will be constructed for high-level LEED certification, a deed that embodies the resurgence of lower Manhattan.
#8 | Banks Go Green to Make Green
They got burned in the subprime lending disaster, but credit banks with anticipating the greening trend and helping it to grow. This year, Wells Fargo
passed $1 billion in loans for LEED-certified projects; Wachovia
have committed to greening their real estate footprints; and Bank of America
, Goldman Sachs and JPMorgan are each developing eco-friendly high-rise office towers. Others, including ABN AMRO, Citi, Deutsche Bank and UBS, are financing green building retrofits through the Clinton Climate Initiative (CCI) (see below).
#9 | Clinton Crusades for Sustainable Cities
Not to be outdone by a certain Nobel-winning former veep, past President Bill Clinton in May launched his Energy Efficiency Building Retrofit Program, a public-private partnership helping to close a widening gap in energy efficiency between existing buildings and new construction. The CCI program provides funding for large cities to retrofit their buildings and incentives for private property owners to follow suit. CCI has also partnered this year with BOMA, GE Real Estate, Wal-Mart, USGBC and the U.S. Conference of Mayors.
#10 | Wal-Mart Rolls Back Energy Consumption
It operates more than 7,000 stores globally and tallied fiscal year 2007 sales larger than the GDP of Sweden, so it's fitting Wal-Mart is leading the green charge for retail. The discount empire has committed to cutting energy usage by one-third in its stores by 2010 via solar power programs, green roofs and an energy-efficient store prototype launched this year. It's also leaning on its mammoth U.S. supply network of more than 60,000 businesses to reduce carbon emissions and report climate change strategy.
Honorable Mention | Awaiting Code Green
We can't justify a Top 10 spot until it launches next year, but ASHRAE's proposed green amendment for building codes is already turning heads. Known as Standard 189P, it would help pave an easy path for local lawmakers to mandate and enforce significant energy reduction in buildings. And it's being co-developed with USGBC, so it should be compatible with LEED. The standard received nearly 1,000 comments during its first public review and is due for a second review early this year.